Earnings of a Lifetime: Comparing Women and Men with College and Graduate Degrees

While women are now more likely to complete four-year college degrees than men,1 it is less clear whether their higher levels of education will translate into closing the wage gap. Using synthetic lifetime earnings calculations, this article underscores the fact that men still earn considerably more than women at all levels of education. We also see that, while women seem more likely to complete degrees in fields that are associated with relatively low lifetime earnings (such as education), men still receive substantially higher incomes than women with similar educational backgrounds.

To meet the challenge of calculating lifetime earnings, this study follows a similar synthetic estimation strategy used by the Census Bureau2 but with one important difference—future earnings are discounted at a rate of 3 percent per year to reflect the time value of money. More details are available in the methodology section at the end of this report.

All Degrees

Overall, bachelor's, master's, professional and doctoral degrees allow graduates the opportunity to greatly enhance their wage-earning potential beyond what they might have earned with merely an associate's degree or less—especially in the long run. Figure 1 provides a rough illustration of the differences in the cumulative lifetime earnings for full-time year-round workers with different terminal degree levels, assuming a 40-year career from age 25 through 64. We see that associate's degree graduates can expect to earn a total of $361,000 or about 22 percent more than high school graduates between the ages of 25 and 34. Three decades later, we expect that associate's degree graduates would now have earned a total of $1.1 million, compared to $910,000 for high school graduates—still roughly a 22 percent increment.

Figure 1: Estimated Cumulative Lifetime Earnings by Sex in the United States

However, when comparing graduates with a bachelor's degree or higher to associate's degree graduates, we see a 45 percent advantage in cumulative earnings by age 35—$524,000 compared to $361,000—and this gap in earnings widens considerably more over the life course. By retirement, graduates with bachelor's and advanced degrees can expect to have earned an average total of $1.8 million while associate's degree graduates only reach $1.1 million—a 61 percent advantage.

The increased lifetime earnings by degree level are remarkably different for women compared to men. Figure 2 suggests that women have an important financial incentive to achieving higher levels of education: only women with a bachelor's degree or higher are likely to earn more over their careers ($1.4 million) than men with a high school degree ($1 million). Men earn far more than women across the life course at all degree levels: 48 percent more at the high school level, 26 percent more at the associate degree level and 45 percent more among those with a bachelor's degree or more.

Figure 2: Estimated Cumulative Lifetime Earnings by Sex and Degree Level in the United States

Bachelor's Degrees by Field

Table 1 shows the estimated lifetime earnings associated with the 10 most popular degree fields of women and men earning bachelor's degrees at Indiana's public universities, assuming that graduates do not earn an additional advanced degree. Among women, the most popular degree fields are in education, business, arts and humanities, and social sciences, which together account for 57 percent of all bachelor's degrees received by women at these institutions. While arts and humanities and social sciences are also popular fields among men, the most popular field by far is business, which accounts for 22 percent of all male graduates. Most notably, education is only the fifth most popular field for men while engineering—which is not even among the top 10 fields for women—ranks third.

Table 1: Estimated Lifetime Earnings for Popular Bachelor's Degrees of Women and Men at Indiana Public Universities, 2002 to 2007

Women

Men

Field of Study

Average Annual Graduates

Lifetime Earnings (in Thousands)

Field of Study

Average Annual Graduates

Lifetime Earnings (in Thousands)

1

Education (except Administration)

2,381

$964

1

Business Administration, Sales and Marketing

2,483

$1,910

2

Business Administration, Sales and Marketing

1,824

$1,355

2

Arts and Humanities (except Music, Visual and Performing Arts)

1,271

$1,553

3

Arts and Humanities (except Music, Visual and Performing Arts)

1,617

$1,303

3

Engineering

1,073

$2,036

4

Social Sciences

1,578

$1,216

4

Social Sciences

1,016

$1,845

5

Communications and Journalism

972

$1,425

5

Education (except Administration)

852

$1,261

6

Nursing

667

$1,368

6

Technology/ Technical Fields (Includes Computer Programming)

825

$1,731

7

Allied Health Fields (except Nursing)

660

$1,370

7

Computer and Information Science (not programming)

626

$1,965

8

Biological, Agricultural and Environmental Sciences

626

$1,253

8

Communications and Journalism

552

$1,575

9

Music/Fine, Visual and Performing Arts

601

$1,210

9

Biological, Agricultural and Environmental Sciences

547

$1,536

10

Social Work

544

$979

10

Music / Fine, Visual and Performing Arts

355

$1,359

Note: There were 64,731 female graduates and 55,782 male graduates over this five-year period for an average of 12,946 and 11,156 per year, respectively. Data for 772 graduates over this period did not indicate gender. Lifetime earnings are synthetic estimates based on average wages for graduates by five-year age cohort, degree level and field. Figures have been adjusted to 2006 dollars and future earnings have been discounted at 3 percent.
Source: IBRC, using data from the Indiana Commission for Higher Education and the National Survey of College Graduates

Even though graduates of any field can choose a wide variety of occupations, we see substantial differences in the earnings of these graduates who work full-time. Among popular women's fields, graduates of business, communications, nursing and allied health all earn over $1.3 million while graduates of education and social work earn less than $1 million. Men with engineering degrees earn an estimated $2 million over the course of their careers whereas education majors are expected to earn $1.3 million.

However, the difference in lifetime earnings between men and women cannot be simply attributed to differences in the popularity of certain degree fields since men receive higher earnings in every field. For example, while business degrees were popular and their graduates relatively well paid among both sexes, men earn an estimated $1.9 million compared to $1.4 million for women—about 41 percent more. Even male graduates in fields associated with relatively low earnings among men still earn amounts comparable to the highest earnings of female graduates. Take men who complete bachelor's degrees in the music, fine and visual arts field: they earn roughly $1.4 million—the same as women earning degrees in business.

Master's Degrees by Field

The most popular master's degree fields for women and men at Indiana's public institutions are again notably different (see Table 2). The most popular field for women is education (30 percent of all graduates) followed by business (13 percent). In contrast, over a third of all men's master's degrees are in business, followed by education (16 percent). Engineering is again the third most popular field among men (13 percent of all graduates) but only the 11th most popular field among women. Allied health fields and nursing are popular among female master's degree graduates but do not rank among the top 10 for men.

Table 2: Estimated Lifetime Earnings for Popular Master's Degrees of Women and Men at Indiana Public Universities, 2002-2007

Women

Men

Field of Study

Average Annual Graduates

Lifetime
Earnings
(in Thousands)

Field of Study

Average Annual Graduates

Lifetime Earnings
(in Thousands)

1

Education (except Administration)

1,124

$1,245

1

Business Administration, Sales and Marketing

1,110

$2,414

2

Business Administration, Sales and Marketing

489

$1,853

2

Education (except Administration)

531

$1,373

3

Public and Educational Administration and Management

282

$1,388

3

Engineering

413

$2,188

4

Allied Health Fields (except Nursing)

267

$1,588

4

Public and Educational Administration and Management

140

$1,634

5

Social Sciences

222

$1,303

5

Biological, Agricultural and Environmental Sciences

139

$1,475

6

Nursing

187

$1,626

6

Social Sciences

134

$1,800

7

Arts and Humanities (except Music, Visual and Performing Arts)

182

$1,201

7

Music/Fine, Visual and Performing Arts

118

$1,282

8

Library Science

175

$1,150

8

Mathematics and Physical Sciences

118

$1,920

9

Music/Fine, Visual and Performing Arts

147

$1,084

9

Arts and Humanities (except Music, Visual and Performing Arts)

118

$1,264

10

Biological, Agricultural and Environmental Sciences

144

$1,304

10

Computer and Information Science (not programming)

94

$2,085

Note: There were 18,422 female graduates and 16,303 male graduates over this five-year period for an average of 3,696 and 3,261 per year, respectively. Data for 626 graduates over this period did not indicate gender. Lifetime earnings are synthetic estimates based on average wages for graduates by five-year age cohort, degree level and field. Figures have been adjusted to 2006 dollars and future earnings have been discounted at 3 percent.
Source: IBRC, using data from the Indiana Commission for Higher Education and the National Survey of College Graduates

We would expect that the more specialized skills of master's degree graduates make them more likely to hold occupations aligned to their fields. It is, therefore, no surprise that women with master's degrees in business and nursing are expected to earn the most over their careers—$1.8 million and $1.6 million, respectively. Men with business degrees earn an estimated $2.4 million and engineering majors are expected to earn $2.1 million.

Again, men with master's degrees have far larger earning potentials than their female counterparts in almost all popular fields, with one notable exception among graduates in the arts and humanities field. Overall, while seven of the 10 most popular degree fields among men allow their graduates over $1.4 million in lifetime earnings, only female graduates in three popular fields earn this amount or more. Interestingly, men with master's degrees in arts and humanities have estimated lifetime earnings that are only marginally more ($63,000 or 5 percent) than their female counterparts—the smallest earnings gap observed in this study.

Professional and Doctoral Degrees by Field

There are similar numbers of female and male graduates of professional degree programs,3 such as those in medicine and law, and these graduates are among the highest paid in the U.S. labor market. Table 3 shows that both women and men are expected to earn around $2.5 million or higher as graduates with popular professional degrees though men still earn substantially more. In particular, men with medical, dental, optometry and veterinary degrees have massive earning potentials slightly less than $3.5 million, while their female counterparts earn roughly $2.8 million (21 percent less).

Table 3: Estimated Lifetime Earnings for Popular Professional Degrees of Women and Men at Indiana Public Universities, 2002 to 2007

Women

Men

Field of Study

Average Annual Graduates

Lifetime
Earnings
(in Thousands)

Field of Study

Average Annual Graduates

Lifetime
Earnings
(in Thousands)

1

Medicine/ Dentistry/ Optometry/ Veterinary Sciences

244

$2,759

1

Law/Legal Studies

256

$2,903

2

Law/Legal Studies

209

$2,453

2

Medicine/ Dentistry/ Optometry/ Veterinary Sciences

250

$3,488

Note: Besides the programs listed above, there are also professional degrees available in nursing, pharmacy and other allied health sciences. There were 2,825 female graduates and 2,767 male graduates over this five-year period for an average of 565 and 553 per year, respectively. Lifetime earnings are synthetic estimates based on average wages for graduates by five-year age cohort, degree level and field. Figures have been adjusted to 2006 dollars and future earnings have been discounted at 3 percent.
Source: IBRC, using data from the Indiana Commission for Higher Education and the National Survey of College Graduates

While women outnumber men at most degree levels, Indiana's public universities still produce more male graduates than female graduates at the doctoral level—approximately 598 compared to 426 each year (see Table 4). The field of choice among women is once again education (23 percent) followed by the social sciences (14 percent) and arts and humanities (12 percent), which together account for half of all female graduates' doctoral degrees. In contrast, half of all men complete doctoral degrees in engineering (24 percent), mathematics and physical sciences (14 percent), and the biological, agricultural and environmental sciences (12 percent).

Table 4 : Estimated Lifetime Earnings for Popular Doctoral Degrees of Women and Men at Indiana Public Universities, 2002 to 2007

Women

Men

Field of Study

Average Annual Graduates

Lifetime
Earnings
(in Thousands)

Field of Study

Average Annual Graduates

Lifetime
Earnings
(in Thousands)

1

Education (except Administration)

99

$1,520

1

Engineering

144

$2,513

2

Social Sciences

61

$1,657

2

Mathematics and Physical Sciences

83

$2,327

3

Arts and Humanities (except Music, Visual and Performing Arts)

51

$1,246

3

Biological, Agricultural and Environmental Sciences

69

$2,022

4

Biological, Agricultural and Environmental Sciences

46

$1,719

4

Education (except Administration)

67

$1,681

5

Mathematics and Physical Sciences

40

$2,003

5

Arts and Humanities (except Music, Visual and Performing Arts)

57

$1,573

6

Allied Health Fields (except Nursing)

37

$1,765

6

Social Sciences

55

$2,053

Note: There were 2,132 female graduates and 2,988 male graduates over this five-year period for an average of 426 and 598 per year, respectively. Data for 173 graduates over this period did not indicate gender. Lifetime earnings are synthetic estimates based on average wages for graduates by five-year age cohort, degree level and field. Figures have been adjusted to 2006 dollars and future earnings have been discounted at 3 percent.
Source: IBRC, using data from the Indiana Commission for Higher Education and the National Survey of College Graduates

There is a wide range of lifetime earnings associated with the six most popular doctoral degree programs. Men with engineering doctorates earn an estimated $2.5 million over the course of their careers—almost 60 percent more than graduates with doctoral degrees in the arts and humanities field ($1.6 million). Similarly, female doctoral graduates in mathematics and physical sciences ($2 million) are expected to earn 60 percent more than their counterparts in arts and humanities (only $1.2 million).

For popular doctoral fields, men again have substantially higher lifetime earnings than women. Four out of the six most popular doctoral degree fields for men have graduates who are expected to earn over $2 million over the course of their careers whereas only female graduates in the popular mathematics and physical sciences field earn that amount. The earnings gap is narrowest in the education field where female graduates are expected to earn about $161,000 (or 11 percent) less than their male counterparts.

Does Higher Learning Equal Higher Earning?

Overall, both men and women earn more over their careers for obtaining higher levels of education, but tremendous differences remain based on gender and field. Higher levels of education allow women greater earnings but these earnings are still far lower than the wages of men. Just because women are now more likely to complete bachelor's degrees than men does not mean that they will necessarily earn higher wages. This is especially true given that graduates of women's most popular field of study (education) earn substantially less than most other fields. Another field that has more female graduates than men is the arts and humanities field, and this is one of the rare fields whose graduates may actually earn less at higher degree levels, perhaps since advanced degree holders are more likely to specialize in lower-paying occupations specific to their training. Female bachelor's degree graduates in arts and humanities typically earn an estimated $1.3 million while master's and doctoral degree graduates in this field earn an estimated $1.2 million. Meanwhile, male arts and humanities graduates make estimated lifetime earnings of $1.5 million with bachelor's degrees but those with master's and doctoral degrees make $1.3 and $1.5 million, respectively.

Women and men do not gain the same returns in wages through higher education, and complex challenges remain to solve this nagging social problem. For starters, we need to examine whether—for each degree and level—the occupations available to both women and men have similar compensation. Higher earning potential is not the only reason women and men choose particular fields of study, but perhaps important occupations related to degrees popular among women—such as teaching jobs for education majors—would become more popular if they were given more value through higher wages.

Methodology

In the most recent National Study of College Graduates (NSCG) survey in 2003, a nationally representative sample of college graduates (bachelor's degree and above) were asked detailed questions about their educational history, wages and work status, along with demographic information (such as sex and age).4 This information was then used to determine the average annual wages (adjusted to 2006 dollars) of each five-year age cohort of graduates (male and female) based on the degree level (bachelor's, master's, etc.) and field of study of their terminal degree. Data for full-time, year-round workers were used—that is, only the earnings of persons who worked 35 hours or more per week (or were on paid leave) during at least 50 weeks of the year.

To reflect a typical 40-year career, this research uses eight five-year cohorts: 25-29 through 60-64. The average wage of each age cohort was multiplied by five to produce the five-year cumulative real earnings. Earnings for each subsequent age cohort were then used as synthetic “future earnings” by discounting them at an annual rate of 3 percent.5 After all cohort calculations were made for the cumulative real earnings of each five-year period, the earnings were summed to produce estimated lifetime earnings for each combination of sex, degree level and field.6 The only exception is that U.S. Census Bureau data based on 10-year age cohorts was used to compare the synthetic lifetime earnings for high school graduates, associate degree graduates and those with bachelor's degrees or higher (for Figure 1 and Figure 2).7

This study also used data from the Indiana Commission for Higher Education (CHE), to determine the most popular degree programs by field for graduates of Indiana public universities that offer four-year and advanced degrees.8All degrees conferred during the five academic years starting in 2002 and ending in 2007 were compiled to produce the average annual number of degrees by field for both men and women. In all, calculations were made for 24 fields at four degree levels—bachelor's, master's, professional and doctoral.

Notes

More information is contained within the Census report “The Big Payoff: Educational Attainment and Synthetic Estimates of Work-Life Earnings” issued in July 2002. Available online at: www.census.gov/prod/2002pubs/p23-210.pdf.

While the National Survey of College Graduates is administered by the National Science Foundation which focuses on the careers of science and engineering degree graduates, the NSCG is designed to collect data on a representative of college graduates in all fields. Detailed information is available at: www.nsf.gov/statistics/srvygrads/.

CHE data reveal that almost all of these degrees are granted by all the campuses of the following five public universities: Ball State University, Indiana State University, Indiana University, Purdue University and the University of Southern Indiana. Since CHE categorizes majors based on the U.S. Department of Education's Classification of Instructional Programs (CIP) system, these majors were first re-classified into fields that were compatible with the National Science Foundation system used by NSCG data.

The formula used is 1/(1+0.03)^y—where y reflects the number of years between the “present” and the mid-point of the particular five-year period in the “future.”

Estimated lifetime earnings =
where is the cohort numbered one through eight (representing 25 to 29, 30 to 34, ... , 60 to 64); is the average annual wage of the cohort in 2006 dollars; and is the discount rate (set at 0.03 for this analysis).